The Lord’s Prayer
Our Father, who art in heaven, hallowed be thy name. Thy Kingdom come, Thy Will be done, on earth as it is in heaven. Give us this day our daily bread and forgive us our trespasses, as we forgive those who trespass against us. And lead us not into temptation, but deliver us from evil. Amen
11:05 am
BKX has declined beneath its Diagonal trendline and may be setting up for a bounce. A possible target for this bounce may be the 50-day Moving Average at 167.37. Dip buyers may be ignoring the broken trendline because BKX still appears to be in an uptrend.
10:20 am
SPX has vanquished the Head & Shoulders neckline at 6770.00 but may be ready to bounce on a possible support at 6720.00, making a back-test of the neckline. Dip-buyers may have disappeared as they are being taken behind the woodshed. Instead, shorts may be taking short-term profits, creating the bounce. This decline may be only the first installment, with more to come.
8:00 am
Good Morning!
SPX futures took a nosedive to 6737.80 in the overnight session before bouncing back above the neckline at 6770.00. This is the second day that the SPX futures have fractured the Head & Shoulders neckline. But will the attempts to open above it succeed? As investors buy more downside protection the struggle to maintain equilibrium intensifies. In addition, the 10-year Treasury yields have climbed well above their Cycle Bottom adding volatility to both bonds and stocks. The overnight futures are thinly traded, making them susceptible to manipulation. Can calm be maintained after the open? The Cycles Model suggests the decline may resume beneath the Head & Shoulders neckline with potential widening swings developing later in the week.
Today’s options chain shows Max Pain at 6875.00. Long gamma begins above 6900.00 while short gamma strengthens beneath 6850.00.
ZeroHedge reports, “US equity futures are down sharply, along with all global markets, as the Iran war expands and escalates (attack on US embassy in Saudi Arabia; uncertainty over duration of Strait of Hormuz closure; targeting non-military infra / businesses) rattling markets and sending oil and the dollar surging.”
The premarket VIX rose to 27.30 this morning before settling back near 35.00. Many traders view 25.00 as the “breakpoint” between a bull market and bear market. While investors have purchased the largest amount of put protection in recent history, we may see even more hedging above this point. The Cycles Model suggests increasing strength in the rally by the weekend. Buybacks begin to taper off this week, offering less resistance to the VIX rally.
The March 11 options chain shows Max pain at 19.00. Short gamma continues to dwindle while long gamma begins at 20.00. Conviction in long gamma tapers off above 30.00. Much of the new activity is centered around the March 18 expiration.
The US 10-year Treasury bond yield surged again this morning, reviving bond volatility. The rally may intensify into an outright panic as the new trend strengthens. TNX has the potential to rise above its cluster of resistance between 41.57 and 42.00 by this weekend. Bond longs may be squeezed in that scenario.
The USD index rose to 99.38 this morning, breaking above the Ending Diagonal trendline near 99.00. USD may rise to the Cycle Top at 100.07 before it pulls back to mid-Cycle support at 98.31. The trend is higher and may intensify over the next couple of weeks. Dollar shorts are at risk.
The Japanese Yen has extended its correction to match the February 6 low. While appearing to be bearish, this action may have prepared the way for a strong resurgence. There is an ongoing debate on the board of the Bank of japan whether to raise rated again from .75% to 1.00% in April. The Cycles Model indicates that the trend in the Yen may have already changed…to the higher. The new Master Cycle may bring a rally to mid-April. The Yen carry trade may be in the bullseye of the coming storm.
Bitcoin is consolidating between the Cycle Bottom and the Intermediate resistance at 69870.00. While on an aggressive buy signal, a move above the 52-day at 77334.00 may upgrade the signal to a confirmed buy. Bitcoin may have established an uptrend that could extend to the end of April.
Gold was slammed down to 5006.00 this morning, creating a sell signal beneath the trendline and Cycle Top at 5194.42. The Cycles Model suggests that volatility may rise even more over the next several weeks with the mid-cycle support at 4200.00 as a potential target.
Zerohedge remarks, “Gold is printing a sizable down candle following yesterday’s shooting star formation. We may be looking at a second lower high developing, raising the risk of a potential double top.”